Retirement portfolio beyond FDs: Diversify for inflation, longevity risks
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar said spreading money across instruments helps balance safety and growth over a long retirement. He cautioned that leaning too heavily on FDs can eat into purchasing power, suggested capping annuities at 25–30% of the corpus, and stressed keeping cash for emergencies.
What Abhishek Kumar said
Why shouldn't a retiree keep the whole corpus in one instrument?
A retirement can last a long time, and no single instrument handles everything it demands. In my view, spreading money across a range of instruments is how you balance the safety of government-backed options against the returns you need to keep going over that long stretch.
Is it a problem if most of my retirement money sits in fixed deposits?
Fixed deposits do not protect you against inflation. Once you account for rising prices and the tax on the interest, the real return on an FD can slip below zero, and leaning on them too much slowly eats into what your money can buy. How much to keep in FDs should depend on your liquidity needs and on how large your emergency fund is.
How much of a retirement corpus should go into annuities?
I would cap annuities at 25 to 30 per cent of your total retirement savings and not go beyond that. Keeping the annuity share within that limit leaves the rest of the money free to be spread across the other instruments a retiree needs for income, growth and access to cash.
Should retirees lock all their savings into long-term products?
No. I suggest never committing all your capital to long-term products. Keep a liquid buffer set aside that you can reach quickly if a medical emergency comes up or your lifestyle changes. That cushion is what lets the rest of the portfolio stay invested as planned when something unexpected happens.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on retirement
The article argues that retirees should diversify beyond fixed deposits to deal with inflation and a long retirement. It discusses limited exposure to equity and hybrid funds, and the pros and cons of FDs, annuities, SCSS and debt fund withdrawal plans for regular income, along with keeping a liquid buffer.
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Retirement portfolio beyond FDs: Diversify for inflation, longevity risks